Pcp negative equity

[Ema]

Hi everyone I'm new here so hoping I'm posting in right place. I took out my pcp arrangement two years ago for my ds3 which was on at £10,000.it was a three year deal, anyway Arnold Clark contacted me to say that I would be able to trade it in now for a new car now.
I love my ds3 so wasn't too bothered about a change but I went anyway to see where I stood and possibly look for another ds3 on a cheaper deal as I'm only using 9000 miles per year out of my 13,000 allowance.
The car is in really good condition and has been well looked after, 24000 miles on the clock.
The guaranteed bubble price was £6500, they've said the part exchange value is £7146 and as already mentioned I do have another year left on my deal until I have to buy/exchange it. Well it floored me when he told me I was I negative equity, about £1000. Can anyone explain why? I'm not really wanting to change the car yet, but this guys telling me I need to do it now as I'll be in even worse position next year when the value has depleted even more. To keep my payments to around £180 per month he's telling me to look at cars around the value of £8000 because there's going to be another £1000 added on straight away due to the negative equity. There wasn't even anything on the forecourt I particularly liked for that value. It just doesn't seen right to me. If I'm to believe what he's telling me I'm in the position where I have to exchange a car I love for somthing I don't really care for because the negative equity will increase next year.
The reason he says I'm in negative equity is because during the time I purchased my car it was worth £10,000 but DS3s have depleted in value to much because people who have took on pcp loans have now returned the vehicles back into the market and nobody wants them, so they've reduced in value.
It sounds like bull to me though, especially when you consider I'm well below my milage allowance, I'm not even at the end of my three year deal and my car is in very good condition!?
I'm really hoping one of you guys who knows more than me can tell me if I'm being mislead here, and what options I have? Thanks for reading this far I know I've waffled a lot!

[BenS]

Sorry to hear this, I really don't know much about finance on cars as I always just buy. Do you have a written contract that you can trawl through to check for this kind of stuff? I always thought you had the option to hand it back and walk away free at the end of the term as well as trading in or paying it off.

[Funky]

I've heard of this happening before (not with a DS3 though), but that doesn't matter really. PCP is great, IF it's right for you. The problem is, as you have found out, is that you can hit negative equity on a vehicle, if that dealer decides that the market value is less that what you currently owe. Meaning you have paid your normal monthly amount on the understanding it will have paid off a decent amount of the finance, by the end of your agreement term, allowing you to, as Ben has said, give it back and walk away, trade it in for something else, or pay the remainder off and keep your DS3.

From what your saying it sounds like your outstanding PCP amount is over 8 grand, which means from your monthly payments of approx £180 over however many months you have been paying it for, you have only in fact paid off approx 2 grand of your PCP loan, with rest being interest on it!

It's a horrible wake up call and unless you are going to keep changing your car every 2 or 3 years and are happy paying a monthly amount for the foreseeable future then PCP works out great. For me personally, I prefer to whack a decent deposit down, usually my old car and an extra few quid I've saved up and pay the rest off on a decent finance package, like a good old fashioned loan from the bank, or the dealer that isn't PCP, with a good low APR over the number of years I'm comfortable paying it for and at the monthly amount I'm able to afford. That way at the end of the term, the vehicle is mine, fully paid for and I don't have the worry of finding many thousands of £'s to pay what the dealer says I have remaining at the end.

However, each person is different and PCP can work very well for many people depending on their own circumstances, it's just not something I've ever been comfortable with.

Your dealer says DS3's have depleted in value!? Well yes, of course they do over time, so does every car ever made! FACT! Using the excuse that lots of DS3's have been handed back and nobody wants them, smells like a typical dealer spinning you a Billy B*llsh*t line to frighten you into doing something you won't want to at the end of your term, like spending more than you want to.

If you want to keep your DS3, see if there is some way of getting a standard finance deal or loan where you own the car at the end. It might take you a while to pay it all off, but you wont have any nasty surprises to deal with.

If you want to trade it in and carry on with a PCP arrangement, being friendly, but assertive and standing your ground on getting the best deal possible may be beneficial to you. If you just want to give it back and walk away, unfortunately you may well have to pay the difference you owe and have nothing to show for it and it's an expensive lesson learned.

Check your paperwork and take it all with you, along with a friend or parent when sorting it all out. It's always good having someone with a bit of experience to help you along the way.

Not sure if this massive essay helps you in any way, but good luck to you and keep us posted on what you decide and how you get on.

[Chris_Blue]

Look at leasing for the future
Return the vehicle at end of (2yr) term, and go get another :-)
No additional charges (Unless you return it mashed up)
Was surprised to understand how many actually lease

[lfcrule1972]

I might consider leasing next time Chris - is that what you do? I've always haggled on price, bought the car via a loan and then paid it off before starting the process again

[Chris_Blue]

I might consider leasing next time Chris - is that what you do? I've always haggled on price, bought the car via a loan and then paid it off before starting the process again

So many people i know now lease new cars that i a probably will.
You can get such a lot for a 2 year lease. What i was paying for the Golf (PCP) i could probably get an Audi RS4 with all the bits for lease

I love the idea of just giving it back hassle free, then getting another new motor

But as i have the Clio 2.0 Sport for messing around in, may go for something a bit lighter on the wallet

Am still thinkin. Been affered a DS3 Chronograph and test drove a Pug 208 gti. No hurry

[lfcrule1972]

Fair enough - I'd like an RS3 but can't afford one to buy (well one that is new enough for me) and the PCP quote was huge....

I'll look into it when I'm thinking of changing from the present car - thanks

[poolman]

My understanding is that all PCP agreements have a Guaranteed Minimum Future Value (GMFV) - sometimes referred to as a balloon or final payment. Basically your deposit (if any) plus monthly payments plus the GMFV (final payment) add up to the total amount of the PCP loan agreement.You can only be in negative equity if you return or swap the car before the end of the agreement term. If you complete the agreement term you have the choice of paying the final payment (GMFV) and owning the car outright or handing the car back. The only extra charges that can be applied are for excess mileage or for damage to the vehicle in excess of fair wear and tear. If your car is worth less than the GMFV that's the dealers problem not yours whatever they might say. It is after all the dealer that agreed it ( well finance company then - but the dealer acts for them).

[stevenc152]

I've heard of this happening before (not with a DS3 though), but that doesn't matter really. PCP is great, IF it's right for you. The problem is, as you have found out, is that you can hit negative equity on a vehicle, if that dealer decides that the market value is less that what you currently owe. Meaning you have paid your normal monthly amount on the understanding it will have paid off a decent amount of the finance, by the end of your agreement term, allowing you to, as Ben has said, give it back and walk away, trade it in for something else, or pay the remainder off and keep your DS3.

From what your saying it sounds like your outstanding PCP amount is over 8 grand, which means from your monthly payments of approx £180 over however many months you have been paying it for, you have only in fact paid off approx 2 grand of your PCP loan, with rest being interest on it!

It's a horrible wake up call and unless you are going to keep changing your car every 2 or 3 years and are happy paying a monthly amount for the foreseeable future then PCP works out great. For me personally, I prefer to whack a decent deposit down, usually my old car and an extra few quid I've saved up and pay the rest off on a decent finance package, like a good old fashioned loan from the bank, or the dealer that isn't PCP, with a good low APR over the number of years I'm comfortable paying it for and at the monthly amount I'm able to afford. That way at the end of the term, the vehicle is mine, fully paid for and I don't have the worry of finding many thousands of £'s to pay what the dealer says I have remaining at the end.

However, each person is different and PCP can work very well for many people depending on their own circumstances, it's just not something I've ever been comfortable with.

Your dealer says DS3's have depleted in value!? Well yes, of course they do over time, so does every car ever made! FACT! Using the excuse that lots of DS3's have been handed back and nobody wants them, smells like a typical dealer spinning you a Billy B*llsh*t line to frighten you into doing something you won't want to at the end of your term, like spending more than you want to.

If you want to keep your DS3, see if there is some way of getting a standard finance deal or loan where you own the car at the end. It might take you a while to pay it all off, but you wont have any nasty surprises to deal with.

If you want to trade it in and carry on with a PCP arrangement, being friendly, but assertive and standing your ground on getting the best deal possible may be beneficial to you. If you just want to give it back and walk away, unfortunately you may well have to pay the difference you owe and have nothing to show for it and it's an expensive lesson learned.

Check your paperwork and take it all with you, along with a friend or parent when sorting it all out. It's always good having someone with a bit of experience to help you along the way.

Not sure if this massive essay helps you in any way, but good luck to you and keep us posted on what you decide and how you get on.

Wish i only had to pay 180 quid a month, paying more than 300 for my A4 lol.

[BAG]

My understanding is that all PCP agreements have a Guaranteed Minimum Future Value (GMFV) - sometimes referred to as a balloon or final payment. Basically your deposit (if any) plus monthly payments plus the GMFV (final payment) add up to the total amount of the PCP loan agreement.You can only be in negative equity if you return or swap the car before the end of the agreement term. If you complete the agreement term you have the choice of paying the final payment (GMFV) and owning the car outright or handing the car back. The only extra charges that can be applied are for excess mileage or for damage to the vehicle in excess of fair wear and tear. If your car is worth less than the GMFV that's the dealers problem not yours whatever they might say. It is after all the dealer that agreed it ( well finance company then - but the dealer acts for them).

I think this is the issue the OP is only two years into a three year agreement and that is why they are looking at a charge to get out of the PCP contract. If they check they will most likely find out that if they allow the contract to run for the full three years they will be able to drop the car back and walk away with no issues. If the sales person is telling you that you will have not be able to return the car and walk with no debt at the end of three years, try asking him to put that in writing and see what his response is. If you read the T&C of your PCP it will most likely say that as long as you don't go over the stated mileage or have any damage tot he car beyond normal wear and tear, you will have the option at the end of the contract of either making a final payment and keeping the car or just hand it back and walk away with no outstanding fees.

[maxmarrie]

Istead of pcp loan, I will suggest you to go for Self Storage Loans because it will be easy for you to pay this loan instead of pcp. Its just my suggestion. You can do what you want.